Daily Fintech

How Bitcoin Will Move From Darknet Early Adopter Niche To Clearnet Mainstream

darknet

Bitcoin’s Darknet phase was critical and will always be with us as a niche

To see how big the Darknet is, go to DeepDotWeb. The Darknet is a perfect early adopter market for bitcoin. The market may be a niche, but it is a big enough niche to prove the technology. There are plenty of people who do things that are illegal in some jurisdiction or another. They may live in a dictatorship or believe that what they want to do (such as use drugs) should be none of their government’s business. Crooks and good people co-exist in these markets.

Bitcoin needed Darknet users because they are motivated. Traditional payment methods don’t work for them, so they use bitcoin even if it takes a bit more effort.

Reality check in one chart – bitcoin is a tiny, tiny part of the world economy. That is why bitcoin needs to move to the Clearnet phase.

I am not suggesting that the Darknet will disappear. It will coexist with the Clearnet. The Darknet serves a real purpose.

Darknet users may move to Altcoins such as Z Cash and Monero that are more private. Or they may stay with Bitcoin and use mixers to obfuscate the transaction.

The mainstream market – what we call the Clearnet –  wants something legal and is less concerned with privacy.

Why Bitcoin will move to Clearnet phase

Clearnet does not just mean retailers adding bitcoin as a payment option. We had lots of Press Releases about that and it is not much more significant than adding some obscure Fiat currency. If you think you will get a lot of visitors from Swaziland (close to Switzerland in the pick list but only about $6 billion GDP) you might offer to accept payments in Swaziland currency. If you think you will get a lot of visitors from bitcoin land you might offer to accept payments in bitcoin. The bitcoin market cap (not quite GDP but the closest parallel with easily verifiable data) is about 10x higher than Swaziland and 10x lower than Switzerland.

Two key points about this transaction:

  1. It does not move the needle for the retailer. They think “if it is totally simple, why not do it, but don’t expect much from it”. You know those signs where it says “Pay With Bitcoin” at a physical shop and the teller has no clue how to do it. It is easier in e-commerce sites, but it is still not a game-changer for them. Ask them what % of revenue comes through Bitcoin.
  2. Retailers will probably convert immediately to Fiat. They really don’t know much about bitcoin. That could depress bitcoin price leading to lower interest in bitcoin.

That is very different from Darknet, where bitcoin payment is critical to both buyer and seller.

The Clearnet phase will be when thousands or even millions of free agent knowledge workers charge for their digital products (code, writing, designs, movies, music, etc) primarily or entirely using bitcoin. These buyers and sellers care about bitcoin, but unlike the Darknet these are for legal transactions.

These Clearnet digital vendors will price in bitcoin (or in Satoshi, depending on the price point) and maybe offer conversion to Fiat and maybe an option to pay using legacy payment rails (maybe for an additional fee). This is the bitcoin-first option.

Then there is the more radical bitcoin-only pricing. You are invited to pay in bitcoin and those who do not already have a bitcoin wallet are given links to help them get into the bitcoin economy. That network effect will drive adoption.

This will happen first among free agent, knowledge workers who offer digital products/services cross border. Let me break that down:

 

 

 

 

Three reasons why this is starting to happen:

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Bernard Lunn is a Fintech thought-leader and deal-maker. 

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